Written By Krishna on Monday, January 07, 2013 | 9:01 PM

Note: Carbon trading remains a fake market solution without any sense of future. The European Commission debates on options for structural reform of the EU emissions trading system (EU ETS) and debates in the developing countries ignores deeper structural questions like a new regime of trading without owning is unfolding. Indeed when governments and companies trade they establish de facto property rights over commonly held global commons-the atmosphere and biosphere.

The automobile, energy, chemical, and banking corporations of the richest countries are increasingly outbidding the interests of historically poorer countries for carbon credits. If market solutions work then profit competition and technical innovation could and should ensure that industry consistently reduces its energy costs.

What is not recognized that the main model for carbon trading is Sulphur Dioxide (SO2) emissions trading under the US 1990 Clean Air Act was meant for a small number of companies to monitor one pollutant from one source-power generation with permanent targets with strong enforcement mechanisms. SO2 emissions trading model for trade in emissions of green house gases is inappropriate.

Even the international emissions trading in CFCs under the Montreal Protocol was limited only to 17 producer companies which monitored one pollutant from one industrial process within a strong legal framework.

Carbon trading is surviving on a speculative market of trillions of dollars. The UNFCCC and Kyoto Protocol is now under the vice like grip of industrial corporations and the financial corporations and is meekly letting carbon trading regime to spread far and wide.

As a consequence, countries which are under obligation to reduce their emissions are doing it through three forms of carbon trading; Joint Implementation, Clean Development Mechanism, International Emissions Trade. It easier to buy carbon credits rather than to reduce dependence on fossil fuels.

Carbon trading provides no role for citizens and democratic legislatures. It is making democratic institutions and solutions besides the role and rights of present and future generations redundant.

Gopal Krishna

ToxicsWatch Alliance (TWA)

Carbon trading reaches record high, to capture low prices

The worth of traded EU carbon allowances and UN greenhouse
gas emissions credits fell by 36% in 2012, although trading reached
record levels.

The value dropped from €95bn in 2011 to a reported €61bn last year,
representing the first annual contraction to be suffered by the sector
since 2008, according to Bloomberg New Energy Finance.
However, trading across the world's carbon markets grew by 26% in
2012, to reach 10.7bn tonnes, which is equivalent to one third of the
world's total emissions of carbon dioxide.
Activity particularly around UN offsets increased substantially
towards the end of the year; in the last quarter it jumped by 70%, in a
rush to issue and acquire these credits before the end of the year and
to take advantage of record low prices.

Commenting on the fall in value of the market, Sarah Deblock, the EU
policy director of the International Emissions Trading Association
(IETA), said that it "reaffirms the importance of the proposal by the
European Commission to backload 900 million allowances during phase III
of the EU ETS”.

A report
issued in November estimated that there was an oversupply of up to two
billion allowances that is unlikely to decline before 2020. When it was
announced, carbon prices rose slightly to over €9 in anticipation.

On 19 February the European Parliament's Environment Committee is to
vote on a crucial one-line amendment to the legislation which would
authorise the European Commission to postpone (or backload) the
auctioning of 900 million allowances until 2019 and 2020, followed by a
plenary vote in March by the European Parliament.

The IETA supports this measure as a way to avoid future routine
interventions in the market, which could cause problems of
predictability for market operators.

The rise in trading activity in the EU ETS was driven by the
increased use of auctioning to distribute allowances, and heightened
volatility due to the threat to withhold allowances from the market.
For most of the latter half of 2012 the price of emission allowances
remained at €6 a tonne, well below the €30 expected in 2008. Short-term
prices are defined by how much demand there is compared to supply, and
demand has been sluggish due to the economic slowdown.

Guy Turner, Bloomberg New Energy Finance’s director of carbon
markets, remains optimistic: “Given that the market has only been in
existence since 2008 and hasn’t suffered a down year in terms of market
size, I think it rode the global financial crisis pretty well,” he said.

"Even in the face of policy paralysis and depressed prices, trading
activity in carbon markets has continued to grow in 2012. This shows how
efficiently these markets work. Policy-makers now need to harness the
energy of this market and create policies that will drive innovation,
spur further reductions in emissions and reduce costs," he added.

He predicts that in 2013 the market will increase to around €80bn and
the following year to €94bn, if the EC's backloading policy is
successful.

Global markets will increase in size substantially over the next few
years. On 14 November last year, California, whose economy is one eighth
the size of Europe's, launched its first carbon allowances auction.
Several regional schemes in China will begin this year, followed by
Australia and South Korea in 2015.

In 2014 India will begin energy efficiency trading and Thailand will launch a voluntary emissions market.

The Australian carbon emission price is fixed at €18 a tonne until 2018, when it will merge with the European scheme.

The Californian scheme was oversubscribed, according to Derik
Broekhoff of Climate Action Reserve, who says the price of carbon
allowances is expected to increase in subsequent quarterly auctions.

“I think you’re going to see the highest prices in the world in
California,″ agrees Turner, ″and although the schemes in Australia,
South Korea and China aren’t actually trading yet, they are positive
developments”.

Long viewed with scepticism by many as a means of tackling climate
change, emission trading may be about to turn a corner. The UK
government will certainly be hoping so, as it will make policies such as
the Carbon Price Floor cheaper and more politically acceptable.